Air China Says Parent May Buy Small Wuhan Carrier

January 13, 2009

Air China said on Tuesday that its parent group was starting preliminary talks on the possible acquisition of East Star Airlines, a small private carrier based in the central city of Wuhan.

The group may buy all or part of East Star, but it is not yet clear whether any agreement will be reached, Air China said in a brief statement.

Air China, which owns well over 150 planes, dwarfs East Star, which has just nine planes, according to the official Securities Times. But the acquisition could help Air China expand its coverage of central China, where it is relatively weak.

Slumping air traffic has made it hard for China's small private airlines to compete with state-owned giants such as Air China, China Eastern and China Southern.

Since December, China Eastern and China Southern have announced plans to receive a total of CNY10 billion yuan (USD$1.5 billion) in cash injections from the government to help them ride out the slump. Private carriers do not have such support.

Last month China's first private airline, Okay Airways, which was founded in 2005, said it would indefinitely halt its passenger services because of the global financial crisis.

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